Spectrum worth Rs 60,000 - Rs. 80,000 crore likely to be sold in this auction: ICRA

The firm also expects that the participation from Indian telcos to be limited in the upcoming auctions, given the evolving ecosystem around the new bands and steep pricing.Danish Khan | ETTelecom | March 17, 2016, 14:59 IST

NEW DELHI: Mobile airwaves worth Rs 60,000- Rs 80,000 crore are likely to be sold in the forthcoming auctions, which would add to the already sizeable debt levels of the industry, credit rating agency ICRA said.

The firm also expects that the participation from Indian telcos to be limited in the upcoming auctions, given the evolving ecosystem around the new bands and steep pricing.

The consolidated debt level of the industry as in December 2015 stood at around Rs. 3,80,000 crore as against around Rs. 2,90,000 crore as in March 2014, the ratings firm said.

“Going forward, given the estimated level of participation in the auctions, the industry debt would rise to around Rs. 4,60,000 crore, further stressing the capital structure of the industry and deteriorating the debt protection metrics.

This rise in debt is expected to worsen the gross debt/OPBDITA levels of the industry to around 6.5 times as against the current levels of 5.4 times,” Sabyasachi Majumdar, Sr. VP, Co-head Corporate Sector Ratings, ICRA Ltd, said.

The firm said that organic deleveraging would be challenging for the industry as it would need to maintain the capital expenditure levels in order to sustain the network rollout momentum, especially for data services. “Thus the industry is expected to face cashflow pressures thereby requiring additional funding,” it added.

The telcos have initiated steps for inorganic deleveraging by selling stake in certain assets. These transactions, if successful, can fetch Rs. 30,000 crore to the industry, ICRA’s estimated.

In the longer term, steady improvement in EBITDA generation is the key to deleveraging of the industry.

The stress on the capital structure of the industry comes at a time when the operating metrics are witnessing pressure. The last quarter saw a decline in voice and data realizations for the industry.

The concern over the declining trend in realizations, both for voice and data, is aggravated by the impending entry of Reliance Jio Infocomm Ltd​.​ (RJio) in the industry.

The firm said that Jio is expected to focus on data services and provide stiff competition to the existing telcos. This would adversely impact the pricing power of the entire industry.

“The only silver lining for the industry has been the recent proposed mergers/spectrum trading deals which can lead to consolidation in the sector, both by way of merger of telcos and of spectrum,” ICRA said.

In India, the smaller telcos are looking to monetize their underutilized spectrum holdings, and the larger players are looking to attain spectrum outside auctions so as to improve their spectrum holding position. “Such transactions, if successful, have the potential to improve the quality of spectrum, and hence bring network efficiencies,” ICRA said.

Several people ET spoke with about Ericsson’s India operations, including its current and former employees, said the Stockholm-based firm has reduced headcount in the last one year or so across functions, in line with its global restructuring.